Question

5. You want to buy a new sports car 3 years from now, and you plan to save $6,700 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make the 3rd deposit, 3 years from now?

Answer 1

6,700(1+0.052)^x that’s your formula, you will only have to plug in 3 into x to find how much you saved.

Answer 2

The amount that i will have is $21,163.32

Let understand that we will employ the use of Future value of annuity (FVA) formulae here.

• I am planning to save $6,700 per year beginning one year today
• The savings will be an account that pays 5.2% interest.

The solution for the amount goes as follows

$Future value of annuity = Annuity * [(1+rate)^{time} - 1] / rate\\Future value of annuity = 6,700 * [(1.052)^3 - 1] / 0.052\\Future value of annuity = 6,700 * 3.158704\\Future value of annuity = 21,163.3168\\Future value of annuity = 21,163.32$

In conclusion, the amount that i will have after making the 3rd deposit, 3 years from now is $21,163.32.

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